Publications
Publications
- January 2011 (Revised June 2011)
- HBS Case Collection
Fixed Income Arbitrage in a Financial Crisis (A): US Treasuries in November 2008
Abstract
Investment manager James Franey confronts an apparent arbitrage opportunity during the global financial crisis of 2008 when he notices a wide yield spread between two U.S. Treasury bonds that mature on the same date. Franey must decide if there is an opportunity, how to structure a trade to exploit it, and how much of his fund's capital to allocate. Case exposition includes considerable detail on financing arrangements, particularly short-selling, margin lending, and repurchase agreements, that support relative-value strategies. Careful attention is paid to the bond math calculations that support the protagonist's analysis and decision. All quoted prices in the case are real and historical, and corresponding Bloomberg commands are provided for each as footnotes.
Keywords
Citation
Taliaferro, Ryan D., and Stephen Blyth. "Fixed Income Arbitrage in a Financial Crisis (A): US Treasuries in November 2008." Harvard Business School Case 211-049, January 2011. (Revised June 2011.)